If you want to understand why the markets are collapsing, read on to discover the reasons behind the recent Black Monday on Wall Street—and how you can still earn a tidy sum during a market crash. 

For those who have ever wondered when the next financial bubble might burst – it just did. 

For one, if you saw how stocks ended last week and checked the global indexes last night, you can tell there’s a lot of fear in the markets right now. 
 
Global markets have entered a perfect storm for a sell off.  

In case you missed it, here’s what happened last Monday on Wall Street:  

• The S&P 500 experienced its largest single-day decline since September 2022. 

• The Dow plummeted by over 1,000 points. 

• The Nasdaq 100 lost nearly $1 billion in market value. 

• The VIX, Wall Street’s Fear Gauge, reached levels last observed during the 2008 Financial Crisis and the 2020 pandemic. 
 
And that was only in the US. 

Source: Reuters  

There’s no way to predict exactly when a stock market downturn will occur, but it’s safe to assume it will happen eventually. Market downturns are normal, and, unfortunately, they’re also unavoidable. 

A market crash essentially means that stock prices across various sectors of the market take a sharp decline. Many investors start selling their shares at the same time, and stock prices fall. When this happens on a broad scale, a market crash can occur. 

Just like this trade that’s causing mayhem in financial markets outside the US: The yen-carry trade. 

Over the last few days, the Japanese yen has surged and hit levels that haven’t been seen since World War II. 

The recent selloff is largely due to the yen-carry trade unwinding after the Bank of Japan raised rates twice in a row for the first time in 17 years. This move caused the yen to rebound from a 40-year low of 161.61 to 142.71 against the U.S. dollar 

Traders responded by selling off foreign assets and converting their money back to yen to limit their losses. It looks like the market might have gone too far too quickly, so we’re now seeing some adjustments during the European trading session as it moves back to more normal levels. 

Here’s what we found the other day: US stock market rebound after major market selloff during recession fears 

Many people associate market crashes with losing money. But if you take the right steps before a market downturn, you might not lose money at all.  

In fact, the opportunistic would see it as the best time to take advantage of the crash and make money from it. 
 
Take a cue from the “Rich Dad Poor Dad” author Robert Kiyosaki who expected a historic crash across financial markets. 

“The biggest crash in world history is coming,” he said, adding that sell-offs create buying opportunities but that markets wouldn’t recover for a long time. “Get more gold, silver, and bitcoin while you can,” he tweeted. 

And because the entry point has been lowered, it’s easy for beginner traders to tap into the markets and start building their portfolios with minimal initial investment. It just takes the right approach. 

3 ways to profit from the market crash 

Exploit the yen-carry trade

While we did say that the crash was caused by the yen-carry trade, opportunities remain; the revised rates remain low enough for investor demand. As with how it has been done, the Japanese yen’s low-interest rates allow traders to borrow yen at low rates and invest in higher-yielding assets or currencies that are temporarily undervalued.  

Traders are, however, advised to be careful of sudden increases in the yen’s value due to upcoming BOJ hikes and Fed cuts; this can affect their returns. 

Trend trading 

Trend trading, a strategy based on identifying and following the direction of market movements, can be particularly effective during such volatile periods. 

We’ve written an article on why trend trading is one of the most effective ways to capture the hottest moments in the market.  
 
Read it here: The glamour of trend trading  

Short the market with CFD  

Since CFDs are derivatives, you don’t own the underlying asset. This also means you have the flexibility to respond swiftly to market crashes, capturing opportunities as they arise. 
 
Another word of wisdom to take heed from is this advice from Robert Kiyosaki: 

 Market crashes can be intimidating, but they also present opportunities for traders who know how to navigate them.  

Why trade CFDs with VT Markets? 

As an award-winning broker, VT Markets equips traders with everything they need to profit from the markets, regardless of market trajectory. By trading CFDs on the VT Markets app, you have… 

• Access to a wide range of assets 

• Tighter spread and near-instant liquidity 

• The power of leverage for higher returns 

…which makes it easy for traders to find opportunities to profit, whether it’s a bear market, a crash, or a downturn. 
 
 
 Start trading with VT Markets now 

Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

Key Points:

• Global oil demand is forecasted to increase by 1.1 mb/d in 2024 and 1.2 mb/d in 2025, with supply expected to grow by 580 kb/d in 2024 and 1.8 mb/d in 2025.
• Brent crude futures dropped from $91 to $83 per barrel, influenced by easing geopolitical concerns and a softer economic outlook.
• Refinery margins have declined across all regions, and global oil inventories surged by 34.6 million barrels (mb) in March, with further increases anticipated.
• The OPEC+ meeting in June will address production policies, with a balanced market expected in 2025, driven by supply growth from non-OPEC+ countries.

As we approach the end of 2024, the oil market remains dynamic, influenced by various factors including supply-demand dynamics, geopolitical developments, and economic conditions. This report provides an in-depth analysis of the current state of the oil market.

Global Oil Demand and Supply Dynamics

Global oil demand is forecasted to rise by 1.1 million barrels per day (mb/d) in 2024, a decrease of 140 thousand barrels per day (kb/d) from previous estimates, primarily due to weaker-than-expected deliveries in Europe, causing a contraction in OECD demand in the first quarter. In 2025, the growth rate is anticipated to remain steady, with an increase of 1.8 mb/d, slightly exceeding the 2024 growth rate.

Meanwhile, global oil supply in 2024 is expected to increase by 580 thousand barrels per day (kb/d), reaching a record 102.7 million barrels per day (mb/d). This growth is fueled by a 1.4 mb/d rise in non-OPEC+ output, while OPEC+ production is predicted to decrease by 840 kb/d due to voluntary cuts.

In 2025, global oil supply is projected to grow by 1.8 mb/d, with non-OPEC+ countries contributing an additional 1.4 mb/d. This marks a reversal from the current year’s decline in OPEC+ output, which is expected to increase by 330 kb/d next year.

Market Conditions and Price Trends

Refinery margins and inventory levels:

Global refinery margins have decreased across all regions due to weaker-than-expected demand growth, leading to a prominent drop in middle distillate cracks and reduced throughput levels. In March, global oil inventories surged by 34.6 million barrels (mb), primarily driven by an increase in oil on water.

However, land stocks fell by 5.1 mb, reaching their lowest level since at least 2016. Preliminary data indicates that global oil stocks continued to rise in April.

Price movement and trends:

Brent crude futures have decreased from a six-month high of over $91 per barrel in early April to approximately $83 per barrel. This decline is primarily due to easing concerns about a broader Middle East conflict and a softer macroeconomic outlook.

Furthermore, benchmark oil prices experienced a sharp correction in April and early May, driven by worries about the global economy and oil demand, as well as progress towards a truce in Gaza.

This sell-off was particularly severe in middle distillate markets, where diesel and jet fuel cracks collapsed.

European Diesel Market Faces Decline and Market Impact

The European diesel market has faced a notable decline due to weak industrial activity and a mild winter, leading to a substantial drop in gasoil consumption.

In 2023, European gasoil demand decreased by 210 kb/d and further declined by 140 kb/d year-over-year in the first quarter of 2024.

This reduction in diesel deliveries, combined with weak demand in the United States, tipped OECD oil demand into contraction for the first quarter. Consequently, global oil demand projections have been revised downward.

OPEC+ Production Policy and Future Outlook

OPEC+ ministers scheduled to meet in Vienna on June 1 to discuss production policy for the remainder of the year.

Despite recent demand weakness, current balances indicate a call on OPEC+ crude oil at around 42 mb/d in the second half of the year, which is approximately 700 kb/d above its April output.

Looking ahead to 2025, the market is expected to be more balanced. Even if OPEC+ maintains voluntary production cuts, global oil supply could increase by 1.8 mb/d, driven by non-OPEC+ output expansions in the United States, Guyana, Canada, and Brazil. Understanding these dynamics is vital for anticipating market shifts in the coming years.

Inventory Management

Global oil inventories and their management will be crucial in maintaining market stability. Preliminary data shows further stock builds in April, indicating a need for careful monitoring to avoid renewed market volatility.

Effective inventory management will help balance supply and demand, ensuring that any sudden changes in production or consumption do not lead to key disruptions in the market.

As global dynamics shift, close attention to inventory levels will be essential in supporting steady market conditions and preventing unexpected fluctuations.

2024-2025 Oil Market Balances Supply with Geopolitical Uncertainties

The oil market outlook for the remainder of 2024 and into 2025 suggests a cautious yet optimistic scenario. While demand growth has been revised downward for 2024, supply adjustments and inventory management are expected to balance the market.

Key factors to watch include OPEC+ production decisions, geopolitical developments, and economic conditions that could influence both demand and prices.

Traders and investors should remain vigilant, leveraging detailed market data and forecasts to navigate this complex landscape effectively.

Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

The 2024 global stock market downturn has sent shockwaves through financial circles worldwide. In just three weeks, approximately USD 6.4 trillion has been wiped off, and Monday’s decline stunned even the most experienced traders.

With major indices like the Nasdaq and Nikkei 225 experiencing significant drops, understanding what led to this downturn is crucial. This article aims to demystify the events of the market downturn, providing clear and practical insights to help everyday investors navigate these turbulent times.

What happened?

In early August 2024, global stock markets experienced a significant crash driven by fears of an impending recession.

The downturn began on Monday, August 5, triggered by disappointing earnings reports and a weak July jobs report. Major indices fell sharply: the S&P 500 dropped 2.9%, the Nasdaq 4.5%, and the Euro Stoxx 2.7%.

Asian markets fared even worse, with the Nikkei plummeting 12.4%, Taiwan’s TAIEX falling 8.4%, and South Korea’s KOSPI decreasing 8.8%. Australia’s ASX 200 closed 3.7% lower, marking its largest one-day drop since May 2020.

The VIX index, which measures market volatility, surged to multi-year highs of 65.7, only surpassed by the peaks of 96.4 during the 2008 financial crisis and 85.5 during the COVID-19 pandemic.

Key catalysts

Several factors combined to create this perfect storm in the global markets:

1. Poor earnings reports

The collapse was partly triggered by disappointing earnings reports from major companies like Amazon, which missed revenue estimates by USD 1 billion, and Intel, whose earnings per share plummeted by 30% compared to the previous quarter. These reports not only fell short of market expectations but also highlighted broader economic weaknesses.

2. Weak economic indicators

A weak July jobs report further fuelled recession fears. Nonfarm payrolls grew by just 114,000 in July, significantly below the downwardly revised 179,000 in June and the Dow Jones estimate for 185,000. The unemployment rate edged higher to 4.3%, its highest since October 2021, triggering an economic rule on recessions. This suggests that the economy might be cooling down faster than anticipated.

3. Interest rate changes

Japan’s surprise interest rate hike played a crucial role in the market turmoil. The Bank of Japan raised rates by 15 basis points, which led to the unwinding of the popular yen carry trade. This move sent shockwaves through the global financial markets, contributing significantly to the sell-off. The sell-off in Japanese markets intensified on Friday, 2 August, with the TOPIX index dropping by 6.14% and falling 13.4% from its peak on 11 July. Foreign investors pulled nearly USD 5 billion out of Japanese stocks over the last two weeks of July, and domestic funds also became net sellers of their own market.

4. Major stake adjustments

Berkshire Hathaway’s decision to drastically reduce its massive Apple stake by approximately 50% sent shockwaves through the market. This move by Warren Buffett’s conglomerate, which now boasts a record-breaking cash hoard of USD 277 billion, sparked concerns among investors. Many interpreted this as a potential loss of confidence in the overall stock market, even from the legendary investor himself.

Regional impacts

The impact of the market collapse varied across different regions, each experiencing its own set of challenges:

Asia

Japan’s Nikkei 225 experienced a dramatic fall, wiping out all of its gains for the year. The Bank of Japan’s interest rate hike not only affected the Nikkei but also led to significant declines in other Asian markets. South Korea’s Kospi and Taiwan’s TAIEX saw some of their worst performances in decades, driven by substantial drops in semiconductor stocks like Samsung Electronics and TSMC.

Australia

The ASX 200’s decline was led by losses in IT stocks, although the country’s strong commodity sector helped cushion the blow somewhat. Major mining companies like BHP and Rio Tinto saw relatively smaller declines, indicating a degree of resilience in the face of broader market turmoil.

Cryptocurrencies

Bitcoin and other major cryptocurrencies also took a hit. Bitcoin lost 19% of its value since Friday, crashing below USD 50,000. This decline reflected a broader risk-off sentiment gripping the markets, as investors moved away from volatile assets.

Broader economic concerns

The market collapse has reignited fears of a global recession, driven by differing central bank strategies. The Bank of Japan raised interest rates by 0.25% to 0.75% to tackle inflation, while the Federal Reserve chose not to cut rates, adding to global uncertainty and volatility.

Geopolitical tensions have also heightened investor anxiety. Increased conflicts in the Middle East, particularly between Iran and its neighbours, have disrupted oil supplies and spiked crude oil prices. Additionally, the U.S. presidential election cycle has become increasingly unpredictable, with key candidates presenting conflicting economic policies. These factors, combined with existing economic weaknesses, have created a turbulent environment for the markets.

What it means for traders

For traders, the market downturn can be both daunting and confusing. Here are some practical steps to navigate these uncertain times:

1. Immediate actions: Avoid panic selling. It’s important not to make hasty decisions based on short-term market movements. Instead, reassess your portfolio and consider whether your current investments align with your long-term financial goals.

2. Long-term strategies: Diversification is key. Ensure that your portfolio is diversified across different asset classes to spread risk. Focus on value investments and maintain a balanced portfolio to withstand market volatility.

3. Opportunities and risks: Market downturns can present buying opportunities. If you have a long-term investment horizon, consider taking advantage of lower prices to buy quality stocks at a discount. Be cautious and conduct thorough research before making any investment decisions. For up-to-date insights and analysis that can help you navigate these market conditions, consult VT Markets’ daily market reports.

Conclusion

The 2024 global stock market downturn has undoubtedly created a challenging environment for investors. However, by understanding the factors that led to this downturn and adopting a strategic approach, traders can navigate these turbulent times. Stay informed, remain patient, and focus on long-term investment strategies to weather the storm and potentially benefit from the eventual market recovery.

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